CFA, CPA or CMA –Pick your abbreviation carefully…
Whether you are searching for a good career path or just curious about the different financial credentials, this article will help guide you through three of the best known professional designations in the financial industry- CFA, CPA and CMA. Certified Public Accountant (CPA), Chartered Financial Analyst (CFA), and Certified Management Account (CMA). Each of these three has a core career focus. Although their abbreviations often sound interchangeable, each designation gives you something unique. Follow along to discover how much coursework and study each designation requires, what careers they typically lead to and how much you could make. And most importantly, what is the best fit for you- CFA, CPA or CMA.
Certified Public Accountant (CPA)
For most people, a CPA is best known as the person who prepares text returns, CPAs certainly do that, but they do much more as well. A CPA license is legally needed in order to do particular jobs, such as public accounting (independent auditing). However, one doesn’t require a CPA license in order to prepare tax returns. State laws govern what CPAs can and cannot do with their licence.
CPA Requirements
Requirements are different as per the state, but in general, in order to sit for the CPA exam, Applicants must have a bachelor’s degree with 120 semester hours. To obtain the CPA designation, applicants must pass the uniform CFA exam, gain relevant work experience and meet additional educational requirements. Overall, additional education requirements usually consist of 24 to 30 Semester hours in accounting, earned through a graduate or bachelors degree in business. Many states also require a minimum number of 1 to 2 years of accounting or auditing experience.
Aside from the experience requirement, a CPA license usually takes about 18 months to complete beyond the educational requirements. Many students choose to pursue a masters degree in accounting to fulfill their educational requirements.
CPA Exam
Although classroom requirements are a major requirement, the CPA exam is difficult in its own right. Exams are administered by the American Institute of Certified Public Accountants, the governing body of CPAs in the United States. The 14-hour computerized exam consists of four sections–
- Auditing and attestation
- Financial accounting and reporting
- Regulation
- Business environment and concepts
CPA Career Options
Many undergraduate accounting students receive job offers of long before they graduate. Accounting is as in-demand field and is projected to continue to be so. According to the US Bureau of labor statistics, employment is projected to grow 18% between 2006 and 2016, this amounts to nearly 226,000 new positions. CPAs wishing to advance to senior-level corporate positions, 2 to 3 years of experience at a major accounting firm is crucial.
For those seeking gainful employment but not wishing to climb the corporate ladder, there are numerous positions available in every city for accountants at small accounting firms and practices. For more ambitious job seekers, lucrative CPA positions are available in hedge fund accounting and Savbanes- Oxley -related work. The chief requirements for these positions are experience and an excellent educational background.
Chartered Financial Analyst (CFA)
The CFA reputation is world-class in the business community, and CFA charterholders work in many countries around the world. The CFA program is very broad and might be more aptly described as the equivalent of a masters degree in finance with accompanying minors in accounting, economics, statistical analysis, and portfolio management. Although the CFA designation is not a legal requirement to perform work as a financial analyst (the cornerstone see if a job), it is a great way to get a foot in the door for one of the most difficult job is to crack.
By reputation, the best way to get a finance job on Wall Street is to get a Masters of Business Administration degree from one of a handful of exclusive schools including Harvard, Wharton, and Stanford. The other best way is to earn the CFA charter and have good industry experience. In some instances, the CFA designation is even held in higher esteem than an MBA.
CFA Requirements
The CFA designation (granted by the CFA Institute) earns its reputation mainly due to the grueling process candidates must endure earning the CFA charter. While the exam is very democratic and open to anyone with a bachelors degree, the only people with a realistic chance of passing out those who are serious about the field. Three general requirements to earn a CFA charter are to pass 3 exams, have an undergraduate degree (in any subject) and have three years of finance-related work experience.
CFA Exam
To earn the CFA charter, candidates must pass a six hours exam for each of three levels. The first exam is available twice per year that is in June and December and the next two are only available in June. The pass rates on the three tests are slightly above 50%, so if you don’t pass the second or third exam, you must wait one year to take it again.
Each of the three tests have overlapping material such as ethics and financial analysis. Generally, though, the first test covers broad financial principles. While the second is a very intensive exam on financial analysis and accounting. And the third exam covers portfolio management and decision-making.
CFA Career Options
As per the CFA Institute, 55% of charterholders work for institutional investors as in-house analysts, 15% work for broker-dealers, and the remaining 29% work for universities and the government. Whereas not nearly as numerous as CPA jobs, CFA related jobs are perhaps more lucrative. CFA Institute’s 2007 member compensation survey reports that the median compensation for an equity portfolio manager with less than five years of experience is dollar 495,000. With over 10 years of experience, the median yearly salary went up to dollar 555,000.
Chartered Management Account (CMA)
CMA is a global certification. It distinguishes accounting and finance professionals as ‘learned’ in areas such as financial planning and analysis, cost accounting, budgeting and forecasting, and financial reporting.
- A professional certification
- Knowledge-based professional
- Content broad-based and business-driven
- International certification with growing recognition
- Preparer and user of accounting information
- Concept-based
- Higher quality, lower cost beans
- Player
CMA Requirements
- Must have obtained a baccalaureate degree.
- No minimum number of hours required, as long as you have degree (even non-business).
- 30 hours of CPE required each year, of which two must be CMA approved ethics course.
- 2 years of continuous experience in management accounting of financial management.
CMA Exam
- The CMA exam now only consists of two parts, that are
- Financial planning and control
- Financial decision making
- Both are of 8 hours exam. Which contains 200 multiple choice questions, 16 to 20 task-based simulations which are based on 4 scenarios.
- It requires 200 to 400 hours of study.
- CMA exam pass rate- worldwide pass rates of this 2-part exam were much lower than the CPA for 12 months ended June 2013. Part-1 was recorded as 33% and part- 2 was recorded as 44%. This growth has skewed the worldwide passing rate as Middle East Africas low passing rate accounted for over 35% of all the CMA exams taken.
CMA Career Options
Financial, business, and systems analyst positions are in demand because companies have realizedd the need to better understand the story behind their data. Companies are constantly striving to make and measure the impact of better business decisions. The most lucrative positions are going to those with strong technical skills, an experience that spans both finance and information systems and can concisely communicate complex subject matters to a variety of audiences. The CMA exam is the best professional certification for these areas as it contains the most relevant content.
CMA Benefits
- Credential most relevant to 73% of accounting jobs
- Knowledge in some of the most highly demanded areas of accounting and Finance
- High return on time due to less time to pass and lower education requirements.
- Leadership opportunities in worldwide professional Association
- 5 to 15% increase in annual earning potential.
